The Effect of Financial Incentives on Hospitals that Serve Poor Patients

Providing financial incentives to hospitals to improve quality is increasingly common, but there is little evidence about their effect on hospitals that provide care for poorer patients.

In this retrospective study of U.S. hospitals, researchers looked at how financial incentives affected those hospitals serving larger, poorer populations. Participants included 251 hospitals in the Premier Hospital Quality Incentive Demonstration program and a national sample of 3,017 hospitals.

Among both the pay-for-performance hospitals and those in the national sample, hospitals with more poor patients had lower baseline performance than did those with fewer poor patients. A high disproportionate-share index was associated with greater improvements in performance for acute myocardial infarction and pneumonia, but not for congestive heart failure; gains were greater among hospitals that received financial incentives than among the national sample. After a three-year period, hospitals treating more poor patients and receiving financial incentives caught up for all three conditions, whereas those with more poor patients among the national sample continued to lag.

The study found no evidence that financial incentives widened the gap in performance between hospitals that serve poor patients and other hospitals. Pay-for-performance programs may be a promising quality improvement strategy for hospitals that serve poor patients.